Invalidated appropriation leads to $6.7 million budget cut

The state’s new fiscal year began on July 1st with most state agencies funded slightly worse than they had originally expected.

Last month, OK Policy broke the story that this year’s General Appropriations (GA) bill diverted $7.9 million out of the trust fund for Oklahoma’s Promise scholarships. In accordance with state statutes, each year the State Board of Equalization certifies an amount to transfer to the trust fund to cover scholarships for the coming year. In December, the Board certified $57 million for Oklahoma’s Promise in FY 2015. However, the Legislature attempted to order the Board to reduce the transfer by $7.9 million so that it could be used to balance the overall FY 2015 budget.

Responding to a request from House Minority Leader Scott Inman, Attorney General Scott Pruitt issued an opinion on June 19th ruling this move unlawful. The Attorney General found that: (1) the provision improperly amends substantive law in an appropriations bill, and (2) the Legislature lacks the authority to direct the Board of Equalization how to calculate the amount to be certified. (In a footnote, the opinion suggested two other ways the provision might well be unconstitutional.)

The invalidation of this section left the budget over-appropriated. State statutes appear to be silent on how to proceed in a situation where appropriations exceed certified revenue. While Rep. Mike Reynolds called for the legislature to return in Special Session to pass a new budget, it was decided instead to apply an across-the-board cut to all agencies in proportion to their funding from the FY 2015 General Revenue fund, which is the procedure spelled out in the Constitution when revenue collections fall below the appropriated amount.

The revenue shortfall amounts to $6,792,254, which is equal to 0.122 percent of each agency’s appropriations from the FY 2015 General Revenue Fund. This spreadsheet shows the cut to each agency in dollars and as a share of total state appropriations. There is some variation in the extent to which agencies will be affected by the shortfall. While most appropriated agencies receive 100 percent of their state funding from the GRF, some are fully or partly funded from various other funds:

Agencies that receive no GRF money in FY 2015 are the Commissioners of Land Office; House of Representatives; Senate; Insurance Commissioner; Department of Labor; Legislative Services Bureau; and Department of Transportation. (We discussed how the Legislature annually exempts itself from possible mid-year cuts by directing its own appropriations from prior year GR funds. However, in an email, a Senate communications staffer indicated that the Senate would voluntarily absorb the same cut as other agencies);

Agencies that receive less than two-thirds of their appropriations from the GRF are the Council on Law Enforcement, Education and Training (10 percent), District Courts, (15 percent), Office of Management and Enterprise Services (32 percent), Supreme Court (42 percent), Ethics Commission (51 percent), and Department of Education (65 percent);

Overall, 77 percent of FY 2015 appropriations are from the GRF.

In dollar terms, the cuts ranged from $165 for the State Bond Advisor to $2.0 million for the Department of Education.

The FY 2015 budget now looks set – unless someone challenges the entire budget bill over the invalidated section or we again face the prospect of a mid-year revenue shortfall.